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The World Is In Trouble

The United States is in Trouble

We make more
than we’ve ever made, we owe more than we’ve ever owed, and we have
less than we've had in decades which is distributed to those that did
not earn the money. This is a working definition of Trouble. The stock
market is at an all-time high while the financial condition of the
country has seriously deteriorated. We are printing $90 billion a month
of little green pieces of paper while the Democrats yell at the
Republicans to up the debt ceiling as they want to spend even more money
to promote social welfare programs. We cannot afford the bills that we have now and we are being asked to add more to them.
This is a recipe for disaster and I am reminded of those months right
before the financial crisis of 2008/2009 where no documentation loans
for Real Estate flourished and easy money was the normal course of
things.
Perhaps the landscape has shifted from “money for nothing” for property to “money for nothing” for our national debt.
Fiscal responsibility has evaporated in a grand scheme to get voters
and Obama has put the Chavez Plan in place which appeals to the poorest
of citizens, hands them money and expects their support at the polls. Hard
work and earning a living are the ethics of past generations that are
slowly being ground to dust in the flurry to socialize America and
re-distribute wealth and having succeeded and having money is now
thought of as a crime not far behind rape and arson. The White Knight is
walking backwards and the Red Queen has lost her head and the Mad
Hatter is in charge of the tea party.

“The trouble with practical jokes is that they very often get elected.”

-Will Rogers

Europe is in Trouble

The
sovereign debt accounting is a fraud. Liabilities are not counted,
contingent liabilities are not recognized and the balance sheet of the
ECB is worse than America’s. Collateral considerations are a
joke and loans are disguised, hidden and placed in various locked
drawers and central bank vaults. The economies of Spain, Italy,
Portugal, Cyprus, Greece, Ireland continue to deteriorate as their
sovereign yields fall due to the Draghi put and the creation of their
little pieces of blue paper which must be used somewhere for something.
There is, once again, easy money in the United States but easier money
in Europe and so the game continues as anyone with any common sense
begins to wonder how it all will blow up and when. Is it to be Inflation
or Valuation and will Gold be the next currency or are there going to
be other answers.

Asia is in Trouble

Japan,
once thought to be an ascending power, has drifted into a nightmare of
insolvency and no growth where Deflation rules and the debts of the
country now exceed the ability of their citizens and institutions to own
them. The push is on for Inflation as the only way out as they argue
with China over some islands that might have some oil reserves. In
China growth is slowing, their one party system will not allow outside
investment past a certain point, their banks are a shadow of the demands
of the country and in disarray as political/economic scapegoats and the
numbers that China provides for growth make no sense and so are
discounted as maybe-maybe statistics. The central banks of both
nations follow the tendrils of the American and European ones and the
entire globe is encased in a soap bubble of our own making as some may
see the fire but no one knows how to get safely out of the theatre.

Find two elephants, two zebras and two giraffes and start building the boat.

The World is in Trouble

The
scheme has worked because there is no place to go, no place to run; no
place to hide. The collusion is past anything we have ever seen in
history. The central banks of the world are supporting intervention and
massive protection of the State and we are witnessing the results while
all of the newly created paper must be put somewhere and so bonds rise
in price, absolute yields on sovereign debt will fall more, compression
will continue and the equity markets will rise. All of this is not the
result of fundamentals or of economics but solely the result of little
pieces of paper being printed, distributed and having to find a home.

“God
didn't make the little green apples, and it don't rain in Indianapolis
in the summer time. And there's no such thing as Dr. Seuss or Disneyland
and Mother Goose, no nursery rhymes.”

-Roger Williams, Little Green Apples

Pricked

The
world is in a gigantic bubble and it is going to get pricked. Now it
takes certain magical incantations and special spells to determine all
of this but we learned a few things from our last go round so the
crystal ball is less cloudy and my wand is at hand. Our last fiasco
whacked the banks on the backside as the valuation of their holdings,
most noticeably their ownership of subprime mortgages and of mortgage
securitizations raised the specter of default and of systemic carnage. This time it will be certain sovereign nations that will be the catalyst.
It may be the mundane running out of cash that will cause the torrent
to flow as Greece, Cyprus, Spain, Italy, Ireland or Portugal that lines
up for more money and is refused by various governments on the
Continent. It may be a refusal by a sovereign nation to accede to the
demands of the IMF/EU/ECB for funding or it may be social unrest in the
spring that unseats some government as nationalism overcomes the grand
European experiment. The giant central bank slosh of money has
lowered yields but it has not improved the financial condition of any
nation on the Continent and so push will come to shove once
again. It may be that Germany refuses to waste anymore of their
citizen’s money or that Britain will have had enough of being run out of
Berlin or it could even be a refusal to fund America’s debt which comes
from China and other Asian countries as our creditworthiness
deteriorates. There are many pressure points pressing against the Bubble
and one of them will give just as the subprime mess was where the prick
took place last time. It was all the cause of “money for nothing and chicks for free”
and while I am unsure about the chicks I am quite sure that the
incredible amount of easy money will take its toll once again. Money,
you know, ceases to be money when all that anyone sees is paper and not
the guarantee that is imprinted on it. It could be Inflation on a grand
scale or worse, Valuation that determines the charade and calls it for
what it is and neither result will be pleasant.

You
cannot keep printing money without consequences and when absolute and
intrinsic valuations replace relative valuations then the game is afoot.
Lower and lower yields also eventually have a serious impact on the
people of a nation, pension funds, insurance companies and backlashes
are certainly possible as the lives of people and institutions are put
at financial risk. When the survival of the State puts its people in
dire straits then, eventually, the citizens will rebel as the nation has
forgotten just who composes its constituents. The people and
institutions that have the capital will only go along quietly for so
long when nations try to take what they have earned and dispossess it
for others. The rich will become poorer and the poor will become poorer
and when those with the capital have been deprived of it so that
everyone is worse off then the Lords of Chaos will be in control once
again. Look for securities that float, States that have no debt in
Municipals, the few countries in the world that are still fiscally
responsible and get ready to hold on to your hat. The charade goes on a
little longer but it will not go on indefinitely and the time for
preparation is now. When one plus one no longer equals two then something will give. Make sure you are not the one crying “Uncle.”

The trouble with going with the flow is that you might be the one that is sucked down the drain!
Article Via: Zerohedge